US embassy cable - 03ROME5680

S E C R E T  ROME 005680 
 
SIPDIS 
 
 
NOFORN 
 
STATE FOR EUR/WE, EUR/PRA, NP/ECNP, INR/SPM, NEA/NGA, 
PM/RSAT 
 
E.O. 12958: DECL: 12/22/2013 
TAGS: PARM, ETTC, PREL, EIND, IR, IT, EXPORT CONTROLS 
SUBJECT: SALE OF FAST BOATS TO IRAN 
 
REF: A. ROME 5552 
 
     B. STATE 338477 
     C. ROME 5202 AND PREVIOUS 
 
Classified By: Acting Economic Minister Kathleen Reddy for Reasons 1.5 
(A) (B) and 1.6X6. 
 
Summary 
------- 
 
1. (S) Embassy continues to press the GOI both to stop any 
shipments of FB Design fast boats still in Italian territory, 
and to institute legal means immediately to stop any future 
export of such technology.  The GOI still insists it has no 
legal authority to stop such shipments.  However, Foreign 
Minister Frattini reportedly has written to Trade Minister 
Marzano to suggest that the Trade Ministry draft a decree law 
banning the export of these boats.  End Summary. 
 
MFA: No Legal Authority to Stop Fast Boat Export. 
--------------------------------------------- --- 
 
2. (S) Economic Counselor called on Ugo de Mohr, MFA 
Coordinator for Non-Proliferation, to follow up on Ref A 
report of Embassy's conversations with other senior GOI 
officials on 1) the need to stop delivery of any fast boats 
still in Italian territory; and 2) Italy's efforts to 
institute dependable legal mechanisms to block any future 
sale of fast boats. 
 
3. (S) de Mohr opened by recounting his personal efforts to 
find a way to block fast boats sales to Iran.  First, he had 
tried (unsuccessfully) to add high speed boats to Italy's 
export control list.  He then  explored whether Italy might 
apply the EU "catch-all principle" (permitting Members to 
control technology not controlled by Member state law, but 
which could be used for "mass destruction").  He had to 
discard this possiblity since, he said, technology capable of 
"mass destruction" under the principle would be technology 
that could be used in nuclear, missle, biological, or 
chemical weaponry; and fast boats did not fall in any of 
these categories. 
 
4. (S) He then explored whether he might use the EU's "catch 
more" principle (permitting Members to control technology not 
controlled by Member state law, but which could be used for 
conventional military purposes).  Even though fast boats 
might be used for such purposes, he said, the country of 
concern (here, Iran) must be under a UN or EU conventional 
arms embargo.  Iran, he added, was not under such an embargo. 
 
However, MFA Has Suggested the GOI Could Pass a Decree Law. 
--------------------------------------------- -------------- 
 
5. (S) De Mohr admitted he was "embarassed" that it had been 
so difficult to find the legal authority to prevent the 
export ofQuch technology.  He implied, however, that Ref A 
demarches and representations with the Foreign Minister, the 
Foreign Minister's Chief of Staff, and the Prime Minister's 
closest advisor, had been helpful.  Still, however, it was 
not the Foreign Ministry that had the "power" to institute 
the necessary legal mechanism, but the Ministry of Productive 
ActiviQes (MPA) (i.e., the Industry Ministry), and the 
Foreign Trade Ministry.  (Note: under Italy's system, the 
Foreign Trade Ministry is actually part of the Industry 
Ministry).  de Mohr said (strictly protect) that he had 
drafted letters yesterday from Foreign Minister Frattini to 
Minister of Productive Activities Marzano and to the Prime 
Minister's office strongly suggesting that the MPA draft a 
decree law forbidding the export of fast boat technology.  He 
did not know whether the letters had been transmitted yet. 
Stressing he was speaking "off the record," he suggested the 
Embassy should raise our concerns with the MPA Minister's 
cabinet to see if the Minister could agree to having such a 
decree law drafted and bringing it immediately to the Council 
of Ministers for approval.  If this approached worked, de 
Mohr noted, a decree law could be drafted in as little as 24 
hours.  However, time was short because there was only one 
 
more Council meeting before the Christmas/New Year holiday 
(on December 23) - and because of the impending shipment of 
the fast boat from Venice. 
 
Stopping the Shipments from Genoa and Venice 
-------------------------------------------- 
 
6. (S) Given the imminent departure of the Venice ship 
(December 19) and with no further information on the 
whereabouts of the one (or two?) other fast boats known to be 
aboard the Iran Makin December 7, de Mohr questioned whether 
the USG was really interested now in having new legal 
controls in place for any future transactions - or whether we 
were still interested in stopping whatever shipments we 
could.  Econ counselor replied firmly that our  instructions 
contined to be the same - that we must urge Italy to take 
whatever steps necessary to stop the shipments still in 
Italian territory. 
 
FB Design's Role 
---------------- 
 
7. (S) Econ Counselor questioned why FB Design could no 
longer live up to its verbal commitment to the GOI not to 
ship its high-speed boats indefinitely while the political 
situation in the Gulf area continued to be so volatile.  de 
Mohr replied that FB Design had told the GOI 1) the firm had 
incurred a large cost in building the four boats in question; 
and 2) the firm would subject itself to a very large fine 
(from Iran) if the firm did not fulfill its contractual 
obligation to deliver the boats as promised.  Reportedly, to 
recover its costs for building the four boats, FB Design 
principals had asked the GOI if either Italy or the USG would 
be interested in buying the boats.  (Italy is not interested, 
de Mohr said.)  On the penalty for failing to fulfill its 
contractual obligation, FB Design  said the contract 
stipulated that the firm could avoid the fine if there were a 
law in place preventing delivery of the boats.  de Mohr said 
this fact prompted him even more to press for the decree law; 
however, he admitted his solution was only a partial one for 
the firm because the firm might be "stuck" with the boats if 
it could not find another customer looking for the exact 
design of the fast boats bound for Iran. 
 
Ministry of Trade Is Energized to Find a Solution. 
--------------------------------------------- ----- 
 
8. (S) Econ Counselor then made an appointment immediately to 
see Gabriele Checchia, Diplomatic Advisor to the Ministers of 
Trade and of Productive Activities Antonio Marzano.  She made 
the same points to Checchia as she had at the MFA.  She also 
said that Italy's Embassy in Washington had recently 
accompanied a large delegation of Italian business 
representatives on calls on the USG in Washington to press 
for access to more sophisticated technology for Italian 
business.  She said that while further access to technology 
would be judged on the merits of a specific transfer, any 
future USG decisions on technology transfer to Italy would 
certainly reflect Italy's record in protecting sensitive 
technology already in hand, including, of course, the 
technology that the USG was now asking Italy to protect. 
Checchia said he was very familiar with the delegation and 
its mission. 
 
9. (S) On the decree law, Checchia said he would see Minister 
Marzano immediately and would see if such a draft law could 
be drafted in time for the Council of Ministers to review it 
December 23.  Checchia hinted this would not be an easy task. 
 
 
10. (S) On stopping the shipments from Venice and Genoa, 
Checchia took detailed notes, but said this task would be 
difficult.  He said the authority to stop such shipments 
would rest with Italy's customs service, which falls within 
the Finance Ministry's authority.  If the customs service 
could not be energized to act quickly, he said, "some other 
way would have to be found." 
 
SEMBLER 
 
 
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 2003ROME05680 - Classification: SECRET